What Is RSF in Commercial Real Estate?

Rentable Square Footage (RSF) is a key concept in commercial real estate, representing the total area a tenant pays rent on. It includes the space exclusively used by a business and a proportionate share of the building’s common areas. Understanding RSF is important for anyone navigating the commercial property market, as it directly influences leasing costs. This metric is a standard measure used across commercial property types, providing a consistent basis for lease agreements.

Understanding Rentable Square Footage

Rentable Square Footage includes the space a tenant occupies for their exclusive use, plus a share of common areas within the building. These common areas are spaces that benefit all tenants, contributing to the overall functionality and appeal of the property. Examples include lobbies, hallways, public restrooms, and stairwells. Shared amenities like fitness centers, conference rooms, or communal kitchens also fall under common areas.

Common areas are included in rentable space to fairly distribute maintenance and operation costs among all tenants. Tenants benefit from these shared spaces, even if not exclusively occupying them. A portion of these spaces is allocated to each tenant’s total rentable area, ensuring landlords can cover expenses like heating, cooling, cleaning, and upkeep.

Calculating Rentable Square Footage

Rentable Square Footage is calculated by applying a “load factor” or “common area factor” to a tenant’s usable square footage. The load factor represents the tenant’s proportionate share of the building’s common areas. This methodology is guided by Building Owners and Managers Association (BOMA) standards, which are widely accepted across North America for consistent and accurate measurements.

To determine RSF, usable square footage (USF) is multiplied by the load factor. For example, 1,000 USF with a 1.20 load factor results in 1,200 RSF (1,000 USF x 1.20). The load factor is calculated by dividing the building’s total rentable square feet by its total usable square feet. Load factors in commercial real estate range from 1.10 to 1.20.

Rentable Versus Usable Square Footage

Usable Square Footage (USF) refers to the specific area a tenant occupies and has exclusive use of within their leased premises. This includes space inside their office walls, such as private offices, workstations, and meeting rooms. USF represents the actual “working” space where a business conducts operations.

In contrast, Rentable Square Footage (RSF) always equals or exceeds USF because it incorporates a proportionate share of common areas. While USF is the space directly controlled by the tenant, RSF is the total area for which a tenant is billed. For instance, a tenant with 800 USF might have 1,000 RSF due to common area inclusion. This distinction helps tenants understand what they are paying for in a commercial lease.

Impact on Commercial Leases

Rentable Square Footage serves as the primary basis for calculating a tenant’s base rent in commercial lease agreements. The rental rate, quoted as a price per square foot per year, is applied to the RSF to determine the total annual rent. This means a tenant pays for both their private space and their allocated share of common areas.

Beyond base rent, RSF also dictates a tenant’s share of operating expenses, such as common area maintenance (CAM) fees, property taxes, and building insurance. These expenses are allocated on a pro-rata basis, meaning each tenant pays a percentage of these costs equivalent to their proportion of the building’s total rentable square footage. RSF helps tenants compare properties and assess their overall cost of occupancy. It plays a significant role in lease negotiations, as a higher load factor can increase the effective cost per usable square foot.